UPDATE: Consumer advocate to challenge rate increase

Deana Stokes Sullivan
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Newfoundland Power seeks rate increases, bigger equity return

The cost of flicking this switch could be more expensive next year if Newfoundland Power's lastest rate increase application is approved. — Telegram photo

Newfoundland’s consumer advocate Tom Johnson says he will be challenging Newfoundland Power’s latest application for a rate increase in 2013.

The company has filed an application with the Newfoundland and Labrador Public Utilities Board for an average rate increase of six per cent effective March 1, 2013.

The utility is proposing that the rate increase vary across each of its customer categories. The proposed average increase ranges from 0.6 to six per cent for commercial categories and 7.2 per cent for residential customers.

Johnson said in an interview, he’s also concerned about another aspect of the application in which Newfoundland Power is seeking a higher return on equity above the 8.8  per cent it now receives.

“One of the things that’s disappointing about the proposal, and I don’t think they’ll get away with it, is an increase to their return on equity which is one of the contributors to the overall rate increase that they’re seeking. There is no way, shape or form that it will be sensible to grant them what they’re seeking, something in the vicinity of 10-1/2 per cent on equity. They are a very well protected, stable monopoly. It just never ceases to amaze me how Newfoundland Power thinks that it should be getting a return like companies earn in the competitive marketplace,” Johnson said.

In due course, he said, the entire application will be put to scrutiny.

“There’s no escaping the fact that there are cost drivers any utility faces, I get that, but all those items have to be closely scrutinized,” he said.

Johnson said it’s unfortunate that this is all coming out in a week when Newfoundland Power employees have been getting a lot of credit for their work to restore power knocked out by high winds from tropical storm Leslie, which has been deserved credit.

He said hopefully people realize that the front-line workers, wearing the hard hats and doing the work, are not the people who are advocating for these rate hikes and higher returns on equity.

Newfoundland Power defended its application in a news release.

“We work hard to minimize the impact of rate increases on our customers while balancing the need to maintain and extend the electricity system to provide our customers with safe, reliable service,” said Earl Ludlow, president and chief executive office, Newfoundland Power Inc. “We remain committed to investing in rural areas of the province while at the same time investing in urban areas where demand for new services continue to grow.”

Newfoundland Power says a primary driver behind the proposed rate change relates to energy supply costs. It says about 93 per cent of the electricity the company delivers to its customers is purchased from Newfoundland and Labrador Hydro. Increases in energy supply costs substantially reflect increased purchases from Hydro to meet increased usage of electricity by Newfoundland Power’s customers.

“Over the past five years alone, we have invested over $350 million in our provincial electricity system,” Ludlow said. “Establishing a fair and reasonable future return on this investment is another component of this rate increase.”

The power company says various other costs associated with the delivery of electricity also impact this rate change, including depreciation, a significant portion of which is the result of connecting a growing number of new homes to the electricity system in recent years and retirement costs.

“When setting electricity rates,” Newfoundland Power said, “it is important that the cost of providing service is fairly allocated and reflects the actual cost of providing electricity to customers in each category.”

“We recognize that any rate increase is significant for our customers,” said Ludlow. “However, even after the proposed rate changes, our electricity rates for residential customers will still remain among the lowest in Atlantic Canada. We are committed to helping all of our customers use energy wisely with enhanced programs and practical tips on how to save energy and save money with our energy efficiency partnership with Hydro, ‘takeCHARGE – Saving Energy Starts Here.’”

Newfoundland Power said it expects its application will be subject to a thorough public review over the coming months.

The company has a customer base of about 250,000 accounts.

 

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Earlier story

Newfoundland Power has filed an application with the Newfoundland and Labrador Public Utilities Board for an average rate increase of six per cent effective March 1, 2013.

The utility company is proposing that the rate increase vary across each of its customer categories. The proposed average increase ranges from 0.6 to six per cent for commercial categories and 7.2 per cent for residential customers.

“We work hard to minimize the impact of rate increases on our customers while balancing the need to maintain and extend the electricity system to provide our customers with safe, reliable service,” said Earl Ludlow, president and chief excutive office, Newfoundland Power Inc. “We remain committed to investing in rural areas of the province while at the same time investing in urban areas where demand for new services continue to grow.”

 Newfoundlland Power says a primary driver behind the proposed rate change relates to energy supply costs. It says about 93 per cent of the electricity the company delivers to its customers is purchased from Newfoundland and Labrador Hydro. Increases in energy supply costs substantially reflect increased purchases from Hydro to meet increased usage of electricity by Newfoundland Power’s customers.

“Over the past five years alone, we have invested over $350 million in our provincial electricity system,” Ludlow said. “Establishing a fair and reasonable future return on this investment is another component of this rate increase.”

The power company says various other costs associated with the delivery of electricity also impact this rate change, including depreciation, a significant portion of which is the result of connecting a growing number of new homes to the electricity system in recent years and retirement costs.

In a news release issued today, Newfoundland Power said “when setting electricity rates, it is important that the cost of providing service is fairly allocated and reflects the actual cost of providing electricity to customers in each category.”

“We recognize that any rate increase is significant for our customers,” said Ludlow. “However, even after the proposed rate changes, our electricity rates for residential customers will still remain among the lowest in Atlantic Canada. We are committed to helping all of our customers use energy wisely with enhanced programs and practical tips on how to save energy and save money with our energy efficiency partnership with Hydro, ‘takeCHARGE – Saving Energy Starts Here.’”

Newfoundland Power said it expects that its application will be subject to a thorough public review over the coming months.

The company has a customer base of about 250,000 accounts.

 

Organizations: Newfoundland Power, Newfoundland and Labrador Board of Commissioners, Newfoundland and Labrador Hydro

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Recent comments

  • gord
    September 14, 2012 - 22:53

    Again we are too passive. Utility companies should be non profit and operate on balanced budgets that cover operation expenses not shareholder demands.How many politicians have shares in Fortis?

  • WILLY
    September 14, 2012 - 20:05

    Maybe the Liberals or NDP will help the people of NL get into solar/wind power like the Europeans this is what needs to be done to put the utilities in their place. http://euobserver.com/solar-energy/117421 http://en.wikipedia.org/wiki/Wind_power_in_Germany

  • Jack
    September 14, 2012 - 19:11

    Obviously, Earl Ludlow didn't learn from Nova Scotia Power's mistakes in gouging consumers with excessive rate hikes well above the national average inflation rate for the last ten years. In fact, Nova Scotians are growing more and more fed up with the utility not just due to excessive rate hikes, but also due to unreliable service and power outages that frequently occur for no legitimate reason. Think about the infamous "sea salt" excuse as an example. Liberty Consulting Group even made a shocking discovery, that Nova Scotia Power overcharged their customers by over $22 million. This utility even tried to hide this evidence, but I'm glad they lost in the end. With Nova Scotian consumers growing frustrated with endless rate hikes, unreliable service, and now overcharging, Nova Scotia Power are now paying the price for their greedy ways. They are even force to act like a normal business with staffing cuts, and also doing something they never done before, listen to their customers. Of course, this problem would not have happened if Nova Scotia's John Buchanan and Donald Cameron Governments didn't private Nova Scotia Power in the first place. If Newfoundland Power keeps gouging consumers like they are planning to do, they will pay the same price as Nova Scotia Power and Emera are doing now.

  • Duffy
    September 14, 2012 - 18:00

    Another Blunderdale as a result of "need more $$$$$ for Musk "Rat" Falls.

  • Maggy Carter
    September 14, 2012 - 16:52

    I won't hold my breath Mr. Johnson. You lost all credibility when you appeared before the PUB - not to challenge the Muskrat boondoggle - but to endorse it. Your lame intervention looked all the more lame when the PUB subsequently refused to rubber stamp a deal clearly concocted to benefit a multitude of special interests at the expense of ordinary ratepayers and taxpayers in this province. Having so badly misread the implications of this Muskrat nightmare for the consumers whose interests you purport to represent, what credibility have you left with the public or the PUB. Your voice could have lent support to the PUB in its courageous decision to stand up to Dunderdale and NALCOR. Instead you stood by while Dunderdale and company lambasted the board for doing exactly what it was legally obliged to do. Do you not understand that the role of the consumer advocate is to urge the board to go beyond its comfort level when scrutinizing these projects and rate requests - not the other way around. What an utter disappointment to the people you are paid to represent. This seven percent rate hike is minuscule alongside the tidal wave of increases that consumers will face if this insane project proceeds.

  • Dan
    September 14, 2012 - 13:56

    Always looking for more money for their shareholders!

  • Paradisian
    September 14, 2012 - 13:07

    God Help us all. I often wonder how better off we would be if the Oil off our shores stayed in the ground. The cost of everything is beyound reach of the modest income earner. Oil, Gas, Electricity, Food. Mr. Ludlow and and the likes, get perks and can well afford increases, while the rest of us have to pinch where ever we can to get by. I hoping to retire soon after 38 years service, I'm eating small amounts of dog food, getting use to colder weather, and reading in the dark to better prepare myself of whats to come for me & my family down the road. Sleep well you greedy S.O.B.'s

  • KD
    September 14, 2012 - 12:52

    What bunch of crap applying for an increase its just as well they increase the rates now rather than wait for a rubber stamp from wells and his cronies

  • rotted
    September 14, 2012 - 12:22

    being a single mom on a small income and spending three days in the dark and lost everything in my freezer and fridge that i can't replace and now they want more money out of my pocket..like really WTF???? why don't ya just take my blood because thats the only thing i got left...you people should be ashamed of yourselfs and i can't wait to vote kathy right out of her seat...

  • So Long PC Gov't.
    September 14, 2012 - 12:12

    Clearly, Mr. Ludlow must be off his rocker to think he can gouge consumers any more than they already do on a monthly basis!! Of course, with Rat Falls looming around the corner and another rate hike coming on top of that, we will hold the record for the highest electricity prices in the country. This is another bad deal for this province and yet another reason to join someone like Tom Osbourne in stopping any and all support for the PC Government.

  • Don
    September 14, 2012 - 12:02

    Every time Nfld Power asks for a rate increase they tell us its because oh the cost of operating the Holyrood Generating station, therefore it is safe to assume that when Muskrat Falls goes on stream electricity will be cheaper and we can expect a large roll back ????????????????????????????? If not then Nfld Power are a bunch of lairs.

  • J
    September 14, 2012 - 11:41

    Greed...... It is astonishing how companies who provide necessities (power, oil and gas, food) and more or less work in a monopolized market can so easily adjust their prices to make the rich richer and poor poorer. What a world!

  • Cold Future
    September 14, 2012 - 11:35

    Just wait until the Muskrat comes into the picture, a 7 % increase will only be a minor increase in comparison. On top of that consumers will get to enjoy subsidizing the power bills for the folks in NS and elsewhere on the mainland. And on top of that the ultimate insult will be that if you switch to oil or wood heat to reduce electricity consumption you will still pay because you will be tied to the take or pay contract betwen nalcor and Hydro. Industrial rates can't go up because of long term sweetheart deals in place. But remember its for the children and grandchildren, look at the big picture, it cannot be monetized, the time could not be better, there's the federal loan guarantee, so sit back and pay up and enjoy it.

  • Brett
    September 14, 2012 - 11:19

    My understanding is that commercial/industrial consumers pay a higher rate. So couldn't increasing residential users fees more than commercial users be more akin to bringing everyone to a more equitable rate? Let's do the math Jack - not make things up. I'd rather pay an extra 7.2% on 10cents/kwhr than .6% on 12cents/kwhr (I haven't looked up the current rates for residential/commercial - nor do I care really - but the math stands). Maybe Nalcor is saying - enough with subsidizing all the residential customers. Also - if the infrastructure is more expensive to build/maintain in certain areas - should those people not pay more?

  • Tilley
    September 14, 2012 - 11:13

    Both NL Power and NS Power had meetings in CLarenville months ago. Perhaps Ross Wiseman can fill us on on all that or hs Kathy made him speaker so he cant talk about anything. I have voted PC for the last time...THIS BUNCH OF DICTATORS HAVE TO GO. The SOONER the BETTER.

  • Timing is Everything
    September 14, 2012 - 11:11

    Wow! They sure knew when to apply for the hike! I'm sure after hurricane leslie and the "fantastic" job they did on restoring power, they think they have this in the bag. We saw darkness, they saw dollar bills! I'm sure they are counting on an overwhelming vote of support because of how well they were able to cope. There should be a cap on necessary services like electricity and gas, my family has two individuals working to support the household and we can barely keep up with the rising costs, I can only imagine what single income families (not always by choice) or pensioners must be thinking!!!!!

  • Fred Harris
    September 14, 2012 - 10:54

    You mean to say this isn't even a rate increase to start deferring the cost of Muskrat Falls? You want to gouge us now and then another 10 percent on top of this hike once the MF deal needs paying for? Start by cutting the salaries of anyone who is "earning" more than $250K annually, at NL Power, NLPUB, NLHydro and every other overpaid plug who can afford these rate increases, (including bonuses - whatever a bonus is...) Then come and talk to us about power hikes... Friggers.

  • Jack
    September 14, 2012 - 10:45

    Why does it seem that Newfoundland Power are starting to sound more and more like Nova Scotia Power in forcing customers to subsidize their return on investment? If you want a return on investment, you have to earn it like any other company. Another thing, stop discriminating against residential customers as most of the rate hikes are focused on them, not heavy users. Besides, if you claim that rate hikes are fair, then everyone should be subjected to the same rate increase levels. Therefore, because Newfoundlanders and Labradorians are being punished enough with utility and cost of living increases well exceeding the national average inflation rate at 2%, I hope the PUB puts a stop to their proposed rate hike and only give them a 2% rate increase. Otherwise, Newfoundland Power will be no different than Emera, Nova Scotia Power's parent company, and the PUB will be no different than Nova Scotia's Utility and Review Board.

  • Jack
    September 14, 2012 - 10:37

    Because these rate hikes sound similar to Nova Scotia Power and Emera, Newfoundland Power and Earl Ludlow should be sighted for plagiarism. In addition, this company seems to be discriminating against residential consumers as they are bearing the brunt of the increases, not industrial users whom consume most of the power. Secondly, if the rate hikes were fair like Earl "Mr. Gouge" Ludlow thinks, everyone would have equal rate increases, not .6% of commercial and a whopping 7.2% for residential. Earl Ludlow, you know what you can do with these rate increases that are not fair and equal? TAKE A HIKE as Newfoundlanders and Labradorians cannot handle anymore rate increases.